Which of the Following Statements Best Addresses the Role of Government

question 171

Multiple Choice

Which of the following statements best addresses the role of government in the stabilization of exchange rates?

• A)Government is not overly concerned with the movement of exchange rates because it does not have a significant impact on the local economy.
• B)Governments prefer to see the local currency strengthen against foreign currencies because imports become cheaper.
• C)Governments prefer to see the local currency weaken against foreign currencies because exports become cheaper and demand for local products increases.
• D)Ultimately, governments can exercise very tight control over exchange rates by purchasing and selling their own currency.
• E)None of the above accurately addresses the role of government in the stabilization of exchange rates.

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